Friday, July 20, 2012

20120720 1809 FCPO EOD Daily Chart Study.

FCPO closed : 3042, changed : -3 points, volume : lower.
Bollinger band reading : side way range bound.
MACD Histogram : falling, seller taking small exposure.
Support : 3020, 2970, 2950, 2920 level.
Resistance : 3050, 3070, 3100, 3150 level.
Comment :
FCPO closed recorded marginal loss with lesser volume transacted. Soy oil currently trading firmer after overnight closed recorded gain while crude oil price currently pullback lower after overnight surged.
Remained slow export data released by 2 cargo surveyors kept price closed in negative territory today with traders watching closely on U.S. drought development.
Technical chart reading remained suggesting a side way range bound market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.

20120720 1735 FKLI EOD Daily Chart Study.

FKLI closed : 1647 changed : -1.5 points, volume : higher.
Bollinger band reading : pullback correction upside biased.
MACD Histogram : turned downward, buyer taking profit.
Support : 1640, 1630, 1620, 1610 level.
Resistance : 1650, 1660, 1670, 1680 level.
Comment :
FKLI closed retreat slightly lower with little increased volume changed hand doing abount 4 points premium compare to cash market that also ended marginally lower. Overnight U.S. markets traded little higher and today Asia markets closed mostly lower while European markets currently trading little lower.
News on missed estimates U.S. existing home sales, contracted Philadelphia manufacturing for a third month and concern on China will keep  property curbs in place resulted most regional market to trade lower however losses were limited as IBM and Ebay reported beat profit forecast.
Back home, FKLI daily chart adjusted to recommending a pullback correction upside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.

20120720 1657 Regional Markets EOD Daily Chart Study.

 DJIA chart reading : little upside biased.
 Hang Seng chart reading : side way range bound little upside biased.
KLCI chart reading :  possible pullback upside biased.

20120720 1601 Global Markets & Commodities Related News.

GLOBAL MARKETS: Asian shares eased but were poised for their biggest weekly gain since January, as strong U.S. corporate earnings lifted the S&P 500 to a 2-1/2 month high while Spain's fiscal woes kept the euro under pressure. European shares were expected to open fractionally lower, taking their cue from losses in Asia and consolidating four month highs as a two-session rally runs out of catalysts. U.S. stocks rose on Thursday for a third straight day, with the S&P 500 at a 2-1/2 month high, as earnings from technology companies and expectations for more monetary stimulus outweighed weak economic data.

FOREX: The euro eased against the dollar and hovered near a record low versus the Australian dollar, undermined by worries about Spain's fiscal woes and recent falls in euro zone money-market rates.

FOREX-Euro held back by Spain's woes, near record low vs Aussie
SINGAPORE, July 20 (Reuters) - The euro eased against the dollar and hovered near a record low versus the Australian dollar on Friday, and was seen on shaky ground due to worries about Spain's fiscal woes and as investors hunt for higher yields.      
Weak demand at a bond auction pushed Spain's 10-year bond yield above 7 percent on Thursday for the first time in more than a week, intensifying doubts over whether Madrid can avoid a full-blown bailout.

Merkel wins Spanish aid vote with big majority
German Chancellor Angela Merkel easily won a parliamentary vote on a euro zone rescue package for Spanish banks on Thursday despite growing unease in her centre-right coalition about the rising cost of Europe's debt crisis for German taxpayers.

Factory, jobs data show U.S. economy mired in weakness
The slowdown in the U.S. economy persisted early in the third quarter as factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new claims for jobless aid surged last week.

POLL-Global economy hobbled by Europe, 2013 promises more
The global economy will labour against a dismal tide from recession-hit Europe for the rest of this year, but 2013 should bring better growth, according to Reuters polls of hundreds of economists worldwide.

GRAINS: U.S. new-crop corn rose, taking its drought-driven rally to more than 55 percent in five weeks, as crops continued to wilt under a searing Midwest heat, stoking fears of a food shortage.

Brazil sugar lineup grows under rains, strike
The lineup of ships waiting to load sugar in Brazil rose to 87 from 81 a week earlier as rains and striking sanitary inspectors at the ports slowed loading, Williams shipping agents said in a report released late Wednesday.

After first-half surge, US drillers find respite in guar wars
U.S. oil and gas drillers are finally catching a break from the surging cost of a tiny seed at the heart of the nation's oil and gas bonanza.

OIL: Brent crude held above $107, edging lower after a surge of 20 percent in four weeks prompted some selling as Israel signalled it would not rush into any open conflict over a deadly attack on its citizens, easing geopolitical worries.

Euro Coal-Holds steady in thin trade
LONDON, July 19 (Reuters) - Physical prompt coal prices held steady on Thursday, supported by oil hitting a seven-week high but few trades were reported.
Prices have found a floor at roughly $85 a tonne and are unlikely to fall much further, although a slight drift lower through the remainder of the summer is possible, traders and end-users said.

China coal demand seen cooling further in H2 -assn
SHANGHAI, July 19 (Reuters) - Coal demand from China, the world's top consumer, is expected to slow further in the second-half, while rising supply from domestic mines and imports swells stocks, a media report on Thursday cited the China Coal Association as saying.
A slower pace of economic growth has already hit China's coal demand in the first half, with consumption up just 2.8 percent to 1.97 billion tonnes from the first half of 2011, the association's vice president Jiang Zhimin was quoted as saying at a briefing.

Iron Ore-Price slide extends, spot at 8-1/2-month low
SINGAPORE, July 20 (Reuters) - Shanghai rebar futures hit a contract low for the eighth time in nine sessions, and are set to post their worst week since October as weak Chinese demand kept the pressure on prices, pulling down iron ore to 8-1/2-month lows. 
"It looks like the trend will continue next week. There is very limited trading in the open market. Sentiment is quite weak and no one is willing to buy," said a manager for an iron ore trading firm in Shanghai.
Vale Q2 iron ore production rises to 80.54 mln tonnes
RIO DE JANEIRO, July 18 (Reuters) - Brazilian miner Vale  produced 80.54 million tonnes of iron ore in the second quarter, the company said in a securities filing Wednesday. 
That marks a 0.35 percent increase from 80.26 million tonnes in the second quarter of 2011, the company said, but a 15.1 percent increase from 69.99 million tonnes of iron ore produced during the first quarter of this year.

PREVIEW-China's rising steel exports slam Asian producers

SEOUL/SHANGHAI, July 20(Reuters) - China's slowing demand for steel is driving Chinese exports of the metal to the highest level in more than three years, flooding the Asian market with supplies at a time when producers such as South Korea's POSCO  are grappling with thinning profits.
Europe used to soak up most of China's steel exports, but the region's protracted debt woes have forced producers like Baoshan Iron & Steel  to turn their shipments to destinations closer to home.

Japan Q2 crude steel output highest in 5 quarters
TOKYO, July 19 (Reuters) - Japan's crude steel output rose on an annual basis in the April-June quarter for the first time in five quarters, as robust car output bolstered the sagging sector, but a strong yen currency and slowing car sales cloud the outlook for the third quarter.
Crude steel output in the second quarter rose 4.3 percent on the year to 27.5 million tonnes, a level not seen since the January-March quarter of 2011, the Japan Iron and Steel Federation said on Thursday.

BASE METALS: London copper was down trading at $7,707 per tonne after touching a high of $7,813 per tonne on Thursday, its highest since July 3.

PRECIOUS METALS: Gold hovered near $1,580, an ounce as investors clung onto hopes for more monetary easing from the U.S. central bank after weak data in the previous session, but a dollar rebound would likely cap gains.

METALS-LME copper holds near 2-week top on China stimulus hope
SHANGHAI, July 20 (Reuters) - London copper prices edged up on Friday, holding near a two-week high hit in the previous session on hopes of more steps by top consumer China to boost its economy after Beijing's comments on jobs creation.
But gains are likely to be capped by China's warning against relaxing curbs on the property sector, favoured by many investors as a quick way to boost domestic consumption, and by weak U.S. data underscoring a fragile U.S. economic recovery.

PRECIOUS-Gold steady on weak US data; dollar weighs
SINGAPORE, July 20 (Reuters) - Gold hovered near $1,580 an ounce on Friday as investors clung onto hopes for more monetary easing from the U.S. central bank after weak data in the previous session, but a dollar rebound would likely cap gains.
The latest data showed factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new jobless claims surged last week.

Baltic's freight index slides on sluggish demand
July 19 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell on Thursday for the eighth straight day as the market continued to struggle with slower cargo trade and mounting fleet growth.
The overall index, a gauge of the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, fell 21 points or 1.96 percent to 1,053 points.

20120720 1131 ASIA FX MARKETS OPEN by Reuters

Market Briefs
• US Weekly Jobless Claims 375k, prev revised up to 377k
• US Continuing Claims 3.31mm, f/c 3.3mm prev rvsd to 3.31mm from 3.3mm
• US July Philly Fed -12.9, f/c -8.0 prev -16.6
• US June Leading Indicators -0.3%, f/c -0.1% prev revised to 0.4% from 0.3%
• MXN May Retail Sales m/m -0.2%, f/c -0.1% prev +0.9%
• MXN May Retail Sales y/y 5.2%, f/c 4.3% prev 2.5%
• CAD May Wholesale Trade 0.9%, f/c 0.3% prev rvsd down to 1.2% from 1.5%
• German FinMin Schaeuble: Spain liable for EU aid to Spanish banks
• S. Africa Reserve Bank unexpectedly cuts Prime Lending Rate 50 bps to 8.5%
• German Bundestag Lower House approves bailout for Spanish banks
• Fitch Ratings affirms Italy at A-, outlook negative

Looking Ahead - Data
• NZD 22:45 June Net migration, no f/c prev 0.10%
• AUD 01:30 Q2 Australian Export Prices, f/c 0.5% prev -7.0%
• AUD 01:30 Q2 Australian Import Prices, f/c 1.5%, prev -1.2%
• CNY 01:35 MNI July Flash Bus. Sentiment Survey
• NZD 03:00 June NZ Credit Card spending m/m, no f/c prev 0.4%

Looking Ahead – Events, Other Releases
• AUD 23:15 RBA Asst. Gov. Kent panel session AU Economic forum

Currency Summaries
EUR/USD   Another choppy session with little to determine about overall direction. EUR/USD opened the NY session 1.2300/05 vs last night's 1.2283 close. O/N range 1.2263/1.2325; NY range 1.2229/90, last 1.2275. US equity marts were the central theme to our session, opened the day +0.50/0.73%, close the session by +0.25/1.20%, tech stocks leading the rally. Plenty of reserve manager & sovereign offers above 1.2300, heavy sales of EUR/AUD, EUR/CAD, EUR/GBP et al providing topside supply. Conversely soft US claims, existing home sales & Philly Fed took their toll on the USD also. Custodian bank flow reports reveal real money still selling EUR & USD & buying JPY.

USD/JPY USD/JPY never really recovered from its sell-off in Asia. Semi-official buyers put paid to early bearish ambitions to trip 79.40 stops. Spec profit taking in EUR/JPY was significant ahead of 97.40 in London, but NorAm traders ran stops below there for a 96.13 session low. US data were all worse than forecast, which is feeding into speculation Bernanke will rev up the QE3 rhetoric at the Jackson Hole CB gathering, if not at the FOMC end-July. The yen lost some ground to the commodity currencies again as the CRB breached its downtrend line off last year's highs today. Cross sales kept the USD/JPY damage limit to 78.42. Jun 6 & 15 lows by 78.58 were the last decent historical support ahead of the Jun 1 nadir at 77.65. Tenkan/Kijun/Cloud formations are rather bearish for USD/JPY and EUR/JPY, the latter primed to retest it 95.59 trend lows if intervention doesn't occur first. USD/JPY offers now at 78.70 & 78.90-79.10. AUD/JPY persists with its quest to retest the July high at 82.35. GBP/JPY remains trapped between its Tenkan and Kijun lines, though resistance is better defined in the 123.90-4.00 area for fade trades

GBP/USD  GBP opened the session bid up by real money & sovereign buying interest and maintained that strength through the session. EUR/GBP got hammered alongside EUR vs commodity ccys & assorted other currency pairs. Fresh life time lows for EUR/AUD & EUR/CAD seeped into EUR/GBP which slumped to 0.7793 lows ( lowest since October 2008) cable paid at 1.5738, highest level in a month. Today's real money flow reports revealed GBP was #1 bought ccy 24-hrs NY open/NY open and has been the #2 most bought major currency over the past week. UK retail sales rose by a meager 0.1% last month compared to a forecast 0.6% increase, but soft US US claims, existing home sales & Philly Fed more than offset.

USD/CHF  The standoff between USD/CHF buyers and sells (EUR/USD seller and buyers) went into a fifth session, with the dollar once again being sold before reaching the previous session high. A Dutch seller (linked to SNB diversification) sold EUR/USD sharply lower, forcing USD/CHF to fresh session highs, but it was not enough to break the string of lower highs. Downside in USD/CHF was limited to 0.9747, a mere 5-pip breach below Wed's lows. Surging commodities and rebounding equity prices fit the general risk-rebound/QE pattern; a pattern normally associate with a setback in the dollar, but US data were uniformly poor, though you could only tell it from slightly lower S-T Tsy yields & tanking bank stocks. 21-DMA's the main USD/CHF target. There's little to recommend the EUR, yet tail risk is being siphoned off and sellers are not being rewarded, which reinforces the summer-time position pruning that's under way. Swiss Trade surplus narrowed in June to 2.25b from 2.52b in May, with Exports and Imports down 2.6% and 3.1% m/m respectively. Year-on-year comparisons were flattered by base effects.

USD/CAD   USD/CAD opened Noram marts 1.0075 vs last night's 1.0102 close, having traded a tight 1.0090/1.0106 O/N range (Matching) Noram session range 1.0067/88, last 1.0079 paid. Heavy selling of EUR/CAD drove that pair to lifetime lows, 1.2320 and close to the legacy currency low of 1.2234 (1989) Heavily oversold technicals forced a short squeeze and lifted that pair to 1.2375 rebound highs, closed nearby. Soft US claims, existing home sales & Philly Fed would normally drag stocks down but they closed +0.27/1.14%, lifted by tech stocks following strong results from IBM reported after the close last night. CA wholesale sales +0.9% handily beat (f/c +0.3%)

AUD/USD  AUD/USD opened the NY session near its O/N highs. Trading for the session saw consolidation of O/N gains in the 1.0390/1.0455 range. Dips continue to be shallow as the scramble for yield continues. O/N mkt rumors of a China RRR cut aided in keeping the pair elevated. Adding to the bullish outlook were reports that the largest Chinese banks have double their loan amount for the first half of July from the previous month. Mkt talk also swirled of Australian exporters needing AUD for tax payments to the ATO. Talk suggests the exporters looked to buy dips but the opportunity hasn’t been there. Resistance sits 1.0255/75 as offers are reported. A break above could accelerate the rally as exporters may scramble to get their Oz. Not much in the way of resistance after 1.0475 though until 1.0555 which corresponds with the 76.4% Fib of 1.0857-0.9578 move and the March 27 high. Technically the bulls remain in charge. Daily Bollis continue to widen & the RSI indicates a positive bias with no divergence. Australian Export/Import prices are due today & any hints inflation is creeping in could see the rally gather pace. Oz rates mkts are paring back future cuts by the RBA. Should prices accelerate upwards AUD may shine further as yield plays are favored & mkt expectations of future rate cuts could diminish further.

NZD/USD  Kiwi began the NY session just below the O/N highs near 0.8050/55 as O/N action saw the pair take out S-T resistance near 0.8020. Mkt talk that high NZD yields are attracting more investors as an alternative to negative yields in many parts of the EZ aided in keeping the pair elevated for the day. The pair consolidated gains during NY as the larger 0.7820/0.8075 range still prevails. A break above 0.8075 may see the trend off the June lows resume as yield hunters won’t want to miss getting long. From a technical viewpoint the bullish outlook is gaining ground. Daily RSI & Stoch had a chance to unwind previous O/B conditions, have turned up and are not O/B. The 21 day Bolli bands have started to widen indicating a breakout could be coming. A clean break above 0.8075/0.8100 could see the pair make a quick run up to the late April highs near 0.8240/50.

20120720 1112 Global Markets & Commodities Related News.

GLOBAL MARKETS-Shares slightly lower, oil eases from 8-week high
HONG KONG, July 20 (Reuters) - Asian shares were a tad weaker but were poised for their biggest weekly gain since January as strong U.S. corporate earnings lifted the S&P 500 to a 2-1/2 month high, although a firm yen kept Japanese shares on the backfoot.
Oil prices eased after hitting an eight-week high overnight as Middle East tension stoked supply concern. While a rally in commodities has seen corn and soybean prices soar to record highs due to a worsening U.S. farm-belt drought.

COMMODITIES-Corn, soy hit record highs; oil jumps on Mideast worry
NEW YORK, July 19 (Reuters) - Corn and soybeans hit all-time highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, while crude oil prices rose to eight-week peaks on worsening tensions in the Middle East.
"Bad data is good when it comes to stimulus hopes," said Phil Flynn, analyst at Price Futures Group in Chicago.

OIL-Oil jumps on Middle East worries, economic hopes
NEW YORK, July 19 (Reuters) - Oil prices rose a seventh straight session on Thursday, reaching an eight-week high, as Middle East tensions reinforced concern about potential supply disruptions while strong corporate earnings lifted investor optimism.
"The complex surged to the upside largely on geopolitical issues related to a renewed clash of rhetoric between Israel and Iran and civil unrest in Syria," Jim Ritterbusch, president at Ritterbusch & Associates, wrote in a note.

NATURAL GAS-US natgas futures end up after light EIA storage build
NEW YORK, July 19 (Reuters) - Front-month U.S. natural gas futures ended higher on Thursday for a second straight day, backed by a government report showing a weekly gas inventory build below market expectations.
"There was a lot of buying following the storage number, but it looks like there's a lot of psychological resistance above $3," said Eric Bickel, analyst at Summit Energy in Kentucky.

EURO COAL-Holds steady in thin trade
LONDON, July 19 (Reuters) - Physical prompt coal prices held steady on Thursday, supported by oil hitting a seven-week high but few trades were reported.
"U.S. and Russian miners have the highest costs and their competition for European market share will provide a price floor, which we think has already been reached, we don't expect an improvement in prices until later this year," said Rudi Vann, coal analyst with Wood Mackenzie.

20120720 1028 Local & Global Economy Related News.

The drought in US is hurting the livestock industry in Malaysia and may push up chicken and pork prices. The Federation of Livestock Farmers‟ Association said the cost of chicken feed had gone up by RM1.50, pushing the price of a 50kg bag of feed to RM91.50. The price of imported soybean meal, which cost between RM1,300 and RM1,400 a tonne at the beginning of the year, had risen to about RM1,800 at the end of May and up to RM2,300 in June. The feed prices usually accounted for at least 80% of production costs. One observer commented that there is not enough supply of alternatives for livestock feed such as palm oil kernel for the local industry, as it is not easy to substitute corn and soybean meals as they are still the cheapest ingredients. (The Star)

There is still upside potential for residential property prices in Iskandar Malaysia, Johor, as the infrastructure is being completed and catalytic projects to lure more investments are still coming in. (Starbiz)

The International Trade and Industry Ministry is ready to grant generous incentives to car manufacturers from both national and non-national assemblers to encourage the production of hybrid and cost-effective models for the ASEAN market. These incentives would include tax exemption apart from the current customised incentives that were already in place for such industry players of hybrid cars. (Starbiz)

Rentals for purpose-built offices in suburban areas outside KL are expected to rise with vibrant business activities, good information and communications technology (ICT) and government projects there, said the valuation and property services Department (JPPH) of the Finance Minsitry. According to the recently launched Purpose-Built Office Rent Index (PBO-RI), the KLCC-Golden Triangle region was the most sought after location in the city in 2010, with the highest average rentals among the four regions the index covers. (Starbiz)

Liberalisation of the country’s services sector is a key factor in attracting more foreign direct investments, especially Japanese investors, said Embassy of Japan counsellor and chief of its economic section Misako Takahashi. She said “Japanese companies are ready to invest, pending liberalisation.” She added if the process of acquiring a license was made more convenient, more service providers would be more willing to invest in Malaysia. She said that foreign equity limitation such as in the insurance sector where the limit is 30%, is a major impediment to investment. (Edge Financial Daily)

More foreign investors are expected to invest in Selangor this year, particularly in the services sector, Malaysian Investment Development Authority (Mida) Selangor Assistant Director Farez Amha Abdullah said. Selangor has been a key driver for the services sector in the country, contributing consistently between 22% and 23% to GDP. From Jan to Mar this year, Selangor has had about 200 approvals with more than RM4bn worth of proposed investments. (Malaysia Reserve)

Malaysia should look into further liberalizing the services sector, licensing issues and foreign equity limitation to ensure continuous influx of Japanese investments. There were crucial issues to address to stem Japanese investments from going to other Asean countries offering attractive investment packages, Embassy of Japan counselor and economic section chief Misako Takahashi said. (StarBiz)

The Federal Government has listed 107 projects capable of generating economic growth for Penang under the Ninth Malaysia Plan ((MP) and 26 projects under 10MP. According to information from the Implementation and Coordination Unit (ICU) in the Prime Minister‟s Department, among the projects are upgrading of the Prai Industrial Area at a cost of RM53m to retain the MNCs operating there and to attract new investments. Other projects include aRM64m upgrading of the hill railway in Bukit Bendera to boost tourism, RM250m expansion of the Penang International Airport and the construction of the second Penang Bridge connecting Batu Kawan on the mainland and Batu Maung on the island at a cost of RM4.5bn. (NST)

The US Conference Board’s index of leading indicators lost 0.3% mom in Jun (a revised +0.4% in May), worse than consensus of -0.1%, weighed down by the new orders index, consumer expectations, building permit, jobless claims, stock prices, and new orders for non-defense capital goods excluding aircraft. (Bloomberg)

US existing-home sales fell 5.4% mom in Jun to a 4.37m annual pace, the lowest of the year (a revised 4.62m pace in May), falling short of consensus of 4.65m. (Bloomberg)

US jobless claims rose 34,000 in the 14 Jul week to 386,000 (a revised 352,000 in the earlier week), overshooting consensus of 365,000. (Bloomberg)

China's yuan is increasingly being used to settle trade transactions in Asia, gradually cementing its way to becoming a regional 'anchor' currency to help “the region to integrate their economies, cooperate on monetary and finance issues as well as gradually open up the (Chinese) financial market,” the Asian Development Bank said. (AFP)

Chinese President Hu Jintao said China would offer US$20bn in new loans to Africa, double the amount Beijing agreed to lend to Africa at the last forum on co-operation with the resource-rich continent in 2009. (AFP)

China's big four state banks doubled their pace of lending in the first half of Jul from a month earlier, although Chinese banks' total new lending in the month is expected to fall by about a third to Rmb650bn, state-run Shanghai Securities News said, citing sources. (Reuters)

Japan’s composite index of coincident economic indicators for May dropped a revised 1.2 points from the previous month, unchanged from a preliminary reading, the Cabinet Office said. The leading index dropped 0.4 pt to 95.2, down from a rise of 0.3 pt in the preliminary report earlier. (The Daily Yomiuri)

Germany's parliament approved by a large majority a European aid package worth up to €100bn for crisis-wracked Spanish banks. (AFP)

Italy: Parliament gives final approval to bill ratifying ESM
The Italian Parliament gave final approval to the European Stability Mechanism (ESM), the euro-region’s permanent bailout fund. The Rome-based lower house, or Chamber of Deputies, voted 325-53 in favour of the bill ratifying the ESM. The Senate passed the bill on 12 July. The EUR500bn fund still requires German ratification before it can take effect. It needs countries representing 90% of the voting weight of the 17 euro nations to give their approval. Italy represents nearly 18% of that measure. (Bloomberg)

UK: Housing market confidence falls
Britons’ confidence in the housing market fell in June compared with three months earlier as the outlook for the economy worsened, according to the Halifax. A gauge of the outlook for property prices slipped to 15 from 19 in March, the mortgage unit of Lloyds Banking Group said. 34% of those surveyed expect prices to rise in the coming 12 months, while 19% forecast a decline. (Gulf News)

UK: Retail sales let down by weather and lack of jubilee bounce
The diamond jubilee failed to produce the promised "bunting boost" and retail sales flat-lined in June, fuelling fears the UK could remain mired in recession for a third quarter. Retail sales grew by just 0.1% in June, compared with expectations of a rise of 0.6%. Cancelled barbecues meant food sales dropped from June 2011 levels and the four-day jubilee weekend had no significant impact on sales. (The Guardian)

Spanish lawmakers approved tough austerity legislation, after the country's borrowing costs neared a new record high at a morning bond auction and its budget minister warned the government is running out of cash to pay its bills. (WSJ)

Fitch affirmed Italy's 'A-' ratings with a 'Negative' outlook, citing the struggling eurozone country's efforts to stabilise its strained public finances and get the economy growing. (AFP)

Australia: Business outlook dims
Australian businesses grew less optimistic about near-term prospects, signalling a slowdown in the fastest-growing developed economy that economists predict will force the central bank to cut interest rates again. The business conditions index for the next three months dropped to 5, the lowest reading since the second quarter of 2009, National Australia Bank said. The second-quarter confidence index slipped to minus 2, the lowest since the third quarter last year, it showed. (Gulf News)

India may offer tax relief to individual investors in equities, with a scheme likely to be launched by the end of this month, an official said, as the government seeks to deepen the country's capital market. (WSJ)

Free trade agreements cannot be credited for the increase in intra-Asian trade as they are often restrictive in scope and difficult to implement, the Asian Development Bank said. Indeed, only a fraction of the region's exporters and importers are using the agreements, despite there being 190 FTAs involving at least one Asian country at the last count in Jan. (AFP)

FDI in Vietnam’s textiles and garment sector has fallen from an annual average of US$460m during the peak period of 2000-08, to an annual average of US$450m for the last three years, and the number of FDI projects has also decreased during the past three years. (Vietnam News)

Vietnam's Foreign Minister Pham Binh Minh and his Indonesian counterpart Marty Natalegawa – have reaffirmed their nations' commitment on the centrality of the Association of Southeast Asian Nations (Asean) in all regional issues. (Asia News Net)

The Thai Industries Sentiment Index (TISI) dropped to 102.7 in Jun, down from 106 in May. The decrease in TISI is the result of the decline in the number of orders, sales, output and profits. (The Nation)

Thailand’s Jun car exports registered at 94,727 units, a 25-year high and marks a 25.2% yoy and 10.1% mom increase. The export value was at THB46.3bn, increasing by 38% yoy. (Thai Financial Post)

Indonesia expects that the increase in non-taxable income (PTKP) limit to be implemented no sooner than Sep 2012, which will see an increase in the amount of non-taxable income from Rp15.8m per year to Rp24m per year. (IFT)

Bank Indonesia data shows that the Financial Stability Index in Jun 2012, closed at above 1.7%, up 0.05% pts, compared to 1.65% in Dec 2011. Compared to the same period last year, the Index increased 0.02% pts. (IFT)

The Philippines’ balance of payments (BOP) surplus dropped to US$14m in Jun, bringing the first-semester surplus to US$1.316bn. However, foreign currency net inflows in Jun was just 6% of the US$222m recorded in the same month of 2011. (Philippine Daily Inquirer)

The World Bank raised its 2012 growth forecast for the Philippines upward to 4.6% from 4.2% for 2012. (AFP)

Japan’s all –industry activity index fell 0.3% mom in May (+0.1% in the Apr reading), matching consensus expectations. On a yoy basis, the measure slowed to 3.2% from 4.1% in Apr. (RTTNews)

The eurozone's current account surplus grew to €10.9bn in May from a revised €5.5bn the previous month, European Central Bank data showed. (WSJ)

Banking: Indonesia's new bank rules may not hit Maybank, CIMB
Indonesia's central bank has issued new rules limiting single ownership in domestic banks at 40% but allows exemptions that could let Malaysia's top two lenders hold on to their controlling stakes in banks there. Bank Indonesia, in a statement on Wednesday, said publiclisted financial institutions will be allowed to keep their current ownership structures in Indonesian banks, provided they maintain high levels of corporate governance and financial health, including a tier-1 capital ratio of over 6%. From December 2013, those that see their corporate governance and financial health ratings fall to unacceptable levels for three consecutive reporting periods will have to sell their stakes down to the new limit. Maybank, in a statement on Thursday, said it was "pleased" with the Bank Indonesia announcement. (Business Times)

Property: Medini gets boost with condo project
Medini Iskandar Malaysia Sdn Bhd on Thursday formalised its JV with China's Zhuoda Real Estate Group to build 2,600 units of high-end condominiums in Medini, Johor. The condominiums, with an estimated GDV of RM2.6bn, will be developed over two phases and completed in 5 year's time. The project is Zhuoda's maiden overseas venture.  (Business Times)

Property: Setia Haruman RM20bn investment plan on track
Cyberjaya's flagship developer Setia Haruman Sdn Bhd's RM20bn investment plan is on track and now it wants to attract 10 high-impact companies to set up operations in the ICT hub of Malaysia. Under its RM20bn investment plan over the next 4 years, the developer said RM2bn had been invested in 1H 2012. Setia Haruman's strategy is to develop purpose-built projects that will fulfill the needs of foreign companies seeking a footing in Cyberjaya. Chairman Tan Sri Mustapha Kamal Abu Bakar said at a media conference on Thursday that Cyberjaya developments needed a paradigm shift from merely developing commercial buildings to creating a liveable environment for the companies' staff. He said they have come to a tipping point where they cannot get investors to come in if they do not provide facilities for the investors. (StarBiz)

Timber: Sarawak may opt for foreign participation in forest estates
The Sarawak government may opt for foreign participation in developing forest plantations to achieve its target of having 1m ha by 2020. The state Resource Planning and Environment Ministry’s Permanent Secretary, Datuk Sudarsono Osman said the foreign involvement would only happen if local companies were unavailable to achieve the target. He said the state aimed to have 15m cubic metres of raw material to be supplied from planted forests in 8 years. Based on last year’s figure, he said Sarawak produced 9.6m cubic metres of logs from natural forests, and this was insufficient in meeting the requirements of the domestic industry. (StarBiz)

Thai Beverage to pay S$2.78b for OCBC's stake in F&N
Thai Beverage pcl, Thailand's biggest beer maker, agreed to pay S$2.78 billion (RM6.9 billion) for Fraser & Neave Ltd's (F&N) shares held by Oversea-Chinese Banking Corp (OCBC) and its partners. The Thai company will buy 313 million F&N shares at S$8.88 each, or about 22 per cent of Singapore's biggest beverage maker from OCBC, its unit Great Eastern Holdings Ltd and Lee Rubber Co, according to a statement on Wednesday. (Source: Business Times)

BAT Q2 profit up on lower expenses
British American Tobacco (Malaysia) Bhd (BAT) posted a 20% increase in net profit to RM220.85mil for the second quarter ended June 30, 2012 (Q2’12), compared with RM184.14mil in the corresponding period last year. In its filing with Bursa Malaysia yesterday, BAT attributed the increase to lower operating expenses of 25%, comparable to the same period in the previous year. (Source: The Star)

20120720 1028 Malaysia Corporate Related News.

I.Star Ideas Factory Sdn Bhd, a wholly-owned subsidiary of Star Publications (Malaysia) Berhad is buying CNM Events Marketing Sdn Bhd for RM45m. CNM Events Marketing Sdn Bhd owns the home and lifestyle exhibition „Perfect Living‟. The vendor CNM Events and warrantor Dato‟ Adriana Law Song Ting jointly and severally provide a guaranteed total profit before tax of not less than RM30m for three years from the completion date of the agreement. The purchase will be funded partially by borrowings and internally generated funds. The rationale for the acquisition is to expand the company‟s existing business in the event and exhibition space. (BMSB)

Tenaga Nasional Bhd (Tenaga) has received assurance from the government that any hike in future gas prices will be offset, or neutralized, in order to avoid past losses, where Tenaga was made to shoulder the effects of a gas shortage. The company said that it has an assurance by the government that whatever happens to the gas prices, Tenaga will remain neutral and it will be a pass-through. However, the company said that it has not been determined whether the pass-through will come in the form of a tariff hike or a fuel cost compensation mechanism. Tenaga also said that it hopes to receive compensation for the entire amount of additional fuel cost instead of only two thirds. An incentive based regulation will be in operation from 2015-2017 with trials in 2014 Tenaga said. The company‟s performance will be benchmarked against key performance indicators (KPIs). If the company performs according to or above the KPIs, it will receive a return based on its weighted average cost of capital. If the company‟s doesn‟t meet the KPIs, the company may have to absorb losses. (Malaysian Reserve, Sun Biz)

Petronas has signed an agreement with Italy-based Versalis SpA to jointly own, develop, construct and operate elastomer plants within its proposed RM60bn refinery and petrochemical integrated development (RAPID) complex in Pengerang, Johor. The JV will produce and market synthetic rubber. It is the fourth such arrangement secured by Petronas for RAPID and the engineering activities will commence immediately. Prior to this, Petronas inked similar agreements with BASF of Germany, Itochu of Japan and PTT Global Chemical of Thailand for various high value-added downstream chemicals. Petronas is currently pursuing the selection of other potential partners and licensors for various facilities to be developed within RAPID. (Bernama)

Syarikat Prasarana Negara Bhd said the government is not obliged to award the systems contract for the Ampang light rail transit (LRT) extension line project to the lowest bidder. Prasarana media manager Azhar Ghazali said the totality of the offer will be considered, which among others, include the life cycle cost that will bring about reducing operating expenditures over equipment lifespan. "Leaked information found in the media recently did not give a full picture. Dated selective excerpts have been superseded by new information resulting from the clarifications. "They did not do justice either by labelling certain activities as interference, when, what, were and are being done, are due diligence processes by the government," Azhar said. Tenders for the systems contract for the Ampang line extension closed on 16 June 16 2011. Eight groups had made the bids, with prices ranging from RM950m-RM1.45bon.They are George Kent-China Railway Construction-Tewet GmbH; Posco-Sojitz-Daewoo International-Thales; Invensys-Balfour Beatty Rail-Ingress; Colas-CMC Engineering-Thales; Samsung-LG-Thales; SNC Lavalin-WW Engineering-Bombardier; Siemens-Scomi Engineering and Ansaldo-Emrail-Leighton. (BT)

The main contractors of the Asian petroleum hub, ZAQ construction, faces a stumbling block in its bid to wind up project owner Asia Petroleum Hub (APH) as two parties are now seeing to throw out the winding-up petition. CIMB Bank and its appointed receiver and manager PricewaterhouseCoopers (PwC) will soon file their applications to strike out the winding-up petition by ZAQ. In January, ZAQ filed the winding-up petition after winning a judgment-in-default against APH last December for RM419.73m in services rendered. ZAQ itself is facing legal action alongside APH in a claim by ZAQ‟s main subcontractor Muhibbah Engineering which is suing for about RM381m owed. (Financial Daily)

Top Glove plans to spend RM3bn in the next 15 years to expand its rubber glove production capacity and acquire more rubber plantation land. This will see the company‟s annual glove output triple, and global market share double by then. Top Glove chairman Tan Sri Lim Wee Chai said the RM3bn investment will finance the construction of another 30 factories across Malaysia, Thailand and Indonesia, and raise the annual capacity to 120bn pieces of gloves. (Financial Daily)

The continuing spat between the federal and the Selangor state governments over the alleged water crisis affecting the state has a taken a new turn with a special Cabinet committee set up. However, it was reported that the Selangor state government had sent a formal letter to the federal government on its planned takeover of Syabas. The protracted water feud between the state government and Syabas percolated to a heightened level since Monday when the state declared its intention to takeover Syabas. (Malaysian Reserve)

Volkswagen AG reportedly renewed its interest to take on a stake in Proton Holdings. Manager Magazin, a German monthly magazine said Volkswagen might consider fully acquiring Proton in the long-term. Any stake sale in Proton would need to approval from the International Trade and Industry Ministry and National Economic Council. (Star Biz)

Perodua has emerged the top selling car maker with 92,923 units sold in the first half of this year vis-a-vis 79,467 cars sold in the same period last year. Proton is in second spot with fewer cars sold at 72,837 units for the period under review against 85,223 units in the first six months last year, says the Malaysian Automotive Association (MAA). Overall, the total automotive industry volume increased to 301,224 in the January-June period this year from 297,203 in the same period 2011. President Datuk Aishah Ahmad said Perodua, the second national car maker, has done very well, achieving the biggest 35% market share for the first half of this year, while Proton's market share was 27.4%. Foreign car manufacturer, Toyota, came in third with 51,567 units sold, against last year's 41,688, while Nissan and Honda sold 16,533 units and 10,165 units, respectively, in the same period compared with 17,306 and 19,246 units last year. (Bernama)

The Malaysia Automotive Association (MAA) is positive that car sales in 2H2012 will be better than the first half, despite some earlier drawbacks. Total industry volume of new vehicles in the first six months of 2012 was 301,224 units, a marginal increase of 1.4% from last year. The MAA forecasts 2012 TIV to be 615,000 units for the year. (Financial Daily)

Honda Malaysia is investing RM1bn over the next three years to build a new production line and improve its infrastructure and dealers network. Of the RM1bn, about RM350m will be spent on building a second production line at its plant here to double capacity to 100,000 units a year. The investment will also allow Honda Malaysia to manufacture hybrid vehicles, making it the first non-national automotive manufacturer to produce hybrid vehicles in the country. "This could potentially turn Malaysia into a regional hub for production of hybrid vehicles," Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said. (BT)

Japan‟s Honda Motor said it is recalling more than 320,000 vehicles worldwide because of a door lock defect. The automaker said its recall was for the 2012 CR-V sports utility vehicle and 2013 Acura ILX sedan. The vast majority of the recall is for the CR-V model, sold mainly in Japan, North America, China and South America. (AFP, BT)

Honda Malaysia will produce locally assembled hybrid vehicles at its Pegoh plant in Alor Gajah. Hiroshi Kobayashi, president and CEO of Asian Honda Motor Co, said the plant will start local production of the Jazz hybrid model by the year-end. "When the first hybrid rolls out of the plant later this year, Honda will become the first non-national automotive manufacturer in Malaysia to locally produce hybrid vehicles," he said. (Financial Daily)

Naza Kia (M) Sdn Bhd sold 7,000 cars in the first half of the year, an increase of 11% over the 6,230 units in the same period last year, said its CEO Datuk Hafiz Syed Abu Bakar yesterday. "We expect to maintain the growth in the second half of the year," he said. Hafiz also said the B-segment 1.4-litre Rio, would be launched in November with a price tag of between RM70,000 and RM80,000. (BT)

Axiata Group announced yesterday that it and its wholly-owned subsidiary Axiata SPV2 Bhd had received approval from the Securities Commission to establish a US$1.5bn (RM4.73bn) sukuk programme. In addition, the two parties had on July 17 entered into a relevant transaction documents in relation to the sukuk programme. Standard and Poor‟s Rating Services have assigned a BBB- rating to the sukuk programme. Moody‟s Investors Service on the other had published a Baa2 rating for Axiata. The sukuk issued will be listed on Bursa Malaysia and the Singapore Exchange. The sukuk programme has been established in order to optimise Axiata‟s balance sheet and improve its capital efficiency. The net proceeds from the issuance will be used for the group‟s general corporate purposes. (StarBiz)

Telekom Malaysia has clarified that the figure of 399,000 UniFi subscribers as reported yesterday actually refers to the total number of UniFi subscribers nationwide currently, and not just for Johor. (BT)

Apex Equity Holdings Bhd expects to record a gain of RM14.9m from the disposal of 17m shares in Finbar Group Limited, which is listed on the Australian Stock Exchange.It said on Thursday that its Australian stockbroker, Investorfirst Securities Ltd, had disposed 17 million Finbar shares of A$1 each for A$17m (RM54.8m). Finbar, which is a property investment and development company in Perth, Australia, builds apartments, town houses, residential and specialised commercial buildings in the Perth metropolitan area.(Starbiz)

Ho Hup Construction Co Bhd has secured RM87m deal to build an integrated army complex in Johor Baru. The company said the contract was awarded by Johor Corp. Construction is targeted to be completed in Jan-2015. (BT)

Zecon Bhd’s unit, Zecon Land Sdn Bhd (ZLSB), has signed a sale and purchase (S&P) agreement with Lembaga Tabung Haji (LTH) to sell a retail mall for RM155.8m. Zecon said it will build an integrated mixed development known as the Vista Tunku Project on the project land. The project is expected to be completed within 24 months. (BT)

Jalur Lebar Nasional Sdn Bhd (Jalenas) is set to invest RM7bn in capital expenditure over the next 5 years to build and operate high-speed broadband infrastructure to penetrate 2.5m premises nationwide. Executive Director Heikal M. Ali said the company executed the five-year national plan late last year, and the capital expenditure was started during the same period. He said the company is now aggressively rolling out its services to over 30,000 premises in Kuantan targeted to be completed by 2013. "The RM7bn is from a combination of bankers and own funding," he told reporters after the signing of a RM850m technology partnership agreement with Metroverse Sdn Bhd. (Bernama)

The Stevedore Employers’ Association (SEA) welcomes the move to privatise Penang Port, hoping it can bring back the glory days of the port. SEA president Datuk Mohd Sobree Abdullah stressed that the privatisation should not be politicised, but the issue was all about the performance of the port and the future of its workers. (The Star)

Boilermech acquires RM20m land with office building
Boilermech Holdings will pay RM20.3m to SSK Logistics SB to acquire an industrial land with a three-storey building in Damansara, Selangor. It said the purchase will be funded via internal funds and bank borrowings. The purchase will help the company to expand its production capacity to meet growing demand for its boilers locally and abroad. (Malaysian Reserve)

20120720 1018 Global Market Related News.

Asia FX By Cornelius Luca - Thu 19 Jul 2012 17:10:38 CT(Source:CME/
The appetite for risk remained relatively firm on Thursday on news that German Chancellor Angela Merkel easily won a parliamentary vote on a Eurozone rescue package for Spanish banks despite unease in her centre-right coalition about the rising cost of Europe's debt crisis for German taxpayers. The foreign currencies extended Wednesday's pattern, so some European currencies consolidated and the commodity currencies and yen marched higher. The US stock indexes advanced. Gold, oil and silver closed up. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is bearish. The LGR short-term model is short on the European currencies and yen.  Good luck!

US: The weekly jobless claims jumped to 386,000 from the previous week's revised figure of 352,000 (350,000 originally).
US: The Conference Board's leading economic index fell by 0.3% in June following a revised 0.4% increase in May.
US: The Philly Fed's diffusion index of current activity rose to -12.9 in July from -16.6 in June.
US: Existing home sales fell 5.4% to an annual rate of 4.37 million in June from an upwardly revised 4.62 million in May. The national median existing-home price rose 5% to $189,400 in June from $180,300 in May.

Asia Stocks Fall, Paring Weekly Gain, on U.S. Data, China (Source:Bloomberg)
Asian stocks fell, paring a weekly gain in the benchmark regional index, amid speculation China will keep property curbs in place and as U.S. economic reports missed estimates. Billabong International Ltd., a surfwear company that counts the Americas as its biggest market, fell 1.8 percent in Sydney. Fanuc Corp. (6954), a maker of industrial robots that gets almost half its sales from Asia outside Japan, declined 0.7 percent in Tokyo. Chinese cement makers may be active today in Hong Kong after Jefferies Group Inc. said growth in demand will slow “drastically” in 2012. The MSCI Asia Pacific Index (MXAP) slid 0.3 percent to 117.19 as of 10:07 a.m. in Tokyo, paring this week’s gains to 1.7 percent. About three shares fell for every two that rose. Markets in Hong Kong and China are yet to open.
“The shape of recovery is still uncertain,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Equity investors need to be patient in any case, but more so at the present time. Valuations are low, which means dividend yields are reasonable.” The MSCI Asia Pacific Index pared its loss from this year’s high on Feb. 29 through yesterday to 8.9 percent amid optimism central banks from China to the U.S. will ease monetary policy. The Asian benchmark, which contains some companies from emerging markets, trades at 11.9 times estimated earnings on average, compared with 13.3 times for the Standard & Poor’s 500 Index and 11 times for the Stoxx Europe 600 Index.

Japan Stocks Drop as U.S. Data Disappoints; Toshiba Gains (Source:Bloomberg)
July 20 (Bloomberg) -- Japanese stocks fell, trimming a weekly gain on the benchmark Nikkei 225 (NKY) Stock Average, after U.S. economic reports missed estimates, damping the earnings outlook for exporters. Toshiba Corp. rose after its chipmaking partner reported better-than-expected profits. Carmaker Toyota Motor Corp. (7203), which depends on North America for a quarter of its sales, dropped 1 percent. Yamato Holdings Co., which provides parcel delivery services, declined 2.9 percent on a report its operating profit slid. Toshiba added 3.2 percent after chipmaking partner SanDisk Corp. posted profits that topped analysts’ estimates. The Nikkei 225 fell 0.3 percent to 8,767.38 as of 9:52 a.m. in Tokyo, trimming weekly gain to 0.5 percent. The broader Topix Index dropped 0.7 percent to 741.90.
“The shape of recovery is still uncertain,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Equity investors need to be patient in any case, but more so at the present time. Valuations are low, which means dividend yields are reasonable.” The Topix rebounded 6.6 percent from a 29-year low reached on June 4 as concern eased about Europe’s debt crisis and central banks around the world cut rates to shore up growth. Shares on the index are valued at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index (SPXL1) and 1.4 for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.

S&P 500 Rises to Two-Month High on Earnings Amid Fed Bets(Source:Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-month high, amid better- than-estimated earnings and bets that disappointing economic data will lead the Federal Reserve to add stimulus. International Business Machines Corp. (IBM), the biggest computer-services provider, and EBay Inc. (EBAY), the largest Internet marketplace, gained at least 3.7 percent as profits beat forecasts. Walgreen Co. (WAG) soared 12 percent after renewing a contract with Express Scripts Inc. (ESRX) Morgan Stanley (MS) slid 5.3 percent after missing estimates as trading revenue plunged. Google Inc. (GOOG), owner of the most popular search engine, rose 3.1 percent at 5:34 p.m. New York time as revenue surged 35 percent.
The S&P 500 (SPX) advanced 0.3 percent to 1,376.51 at 4 p.m. New York time, the highest since May 3. The Dow Jones Industrial Average added 34.66 points, or 0.3 percent, to 12,943.36. The Nasdaq Composite Index gained 0.8 percent to 2,965.90. Volume for exchange-listed stocks in the U.S. was 7 billion shares today, up 4.8 percent from the three-month average. “We’ve been watching very good earnings, but there were too many disappointing economic reports today,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “There’s some comfort based on the idea that if things get worse, the Fed will do something. We’ll have to wait and see.”

European Stocks Rise as Company Earnings Beat Forecasts(Source:Bloomberg)
European stocks rose to the highest level since early April as companies reported quarterly earnings that exceeded analysts’ estimates. Akzo Nobel NV (AKZA) jumped 6.3 percent after posting second- quarter results that beat forecasts. Remy Cointreau SA, France’s second-biggest distiller, increased 6.2 percent on higher revenue. Nokia Oyj (NOK1V) surged 12 percent after sales of its flagship smartphone beat analysts’ estimates. The Stoxx 600 climbed 1.1 percent to 261.86 at the close of trade. The gauge is heading for a seventh straight week of gains, which would be the longest winning streak in more than six years, as central banks cut interest rates and euro-area leaders eased repayment rules for Spanish banks.
“Markets are focusing on the fact that earnings are still strong,” said Theodore Krintas, managing director of Attica Wealth Management in Athens. “What I see is a kind of aversion to bonds generally. It seems that European markets are gaining from the fact that extra liquidity is moving towards equities.” The U.S. economy expanded at a “modest to moderate” pace in June and early July, the Federal Reserve said yesterday in its Beige Book business survey, which is based on reports from its 12 district banks.

Emerging Stocks Rise to Two-Week High on China Stimulus Outlook(Source:Bloomberg)
Emerging-market stocks climbed to a two-week high on prospects policy makers in China and the U.S. will take more steps to bolster economic growth. The MSCI Emerging Markets Index (MXEF) advanced 1.1 percent to 941.13 in New York, the highest close since July 6. Petroleo Brasileiro Sa (PETR4) gained in Sao Paulo after oil rose. Taiwan Semiconductor Manufacturing Co. (2330) gained the most in seven weeks before the company reported its highest profit in six quarters. Bank of Communications Co. led Chinese lenders higher on bets of further cut to the reserve-ratio requirement.
China’s Premier Wen Jiabao will probably decide to cut banks’ reserve requirements and encourage lending as the cabinet meets to discuss efforts to revive growth, the swap market indicates, injecting liquidity into the system as the absence of robust growth in the developed world weights on markets globally. More Americans than forecast filed first-time claims for unemployment last week while sales of previously owned U.S. homes unexpectedly fell in June to an eight-month low. “If there is a greater slowdown in the developed world, you have more room for policy action in the emerging market space,” Tim Hall, who manages about $700 million at Deltec Asset Management, said by phone from New York. “Central banks in these markets have a lot of firepower because of which you have a potential for pick up in the economies in the second half of the year.”

Euro Falls Versus Most Major Peers Before Confidence Data(Source:Bloomberg)
The euro slid versus most of its major peers before data that economists say will show consumer confidence remained weak and manufacturing continued to shrink in the 17-nation region. Europe’s common currency was 0.2 percent from the lowest level in more than three years versus the British pound after Spain’s borrowing costs surged at an auction yesterday, rekindling concern the region’s debt crisis is deepening. The dollar maintained a five-day slide against the Australian currency after stocks rose globally, sapping demand for lower- yielding assets. “There are a number of issues with the European economy. It is pretty clearly in quite an acute contraction,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “The euro is going to remain a weak currency.”
The euro declined 0.2 percent to $1.2255 as of 9:45 a.m. in Tokyo. It was little changed at 96.55 yen and set to complete a fourth weekly drop. The shared currency traded at 78.04 pence after touching 77.92 yesterday, the weakest since October 2008.

Aussie Near 11-Week High on Fed Stimulus Speculation(Source:Bloomberg)
Australia’s dollar traded 0.2 percent from the highest level in 11 weeks before U.S. data next week that may add to the case for more monetary stimulus from the Federal Reserve. The Australian and New Zealand dollars headed for weekly gains as raw material prices rose, boosting demand for the currencies of commodity exporting countries. Investor appetite for the so-called Aussie was limited before data which may show exports stalled last quarter. “The U.S. economy is losing momentum and there’s growing expectation that the Fed will do more stimulus,” said Peter Dragicevich, foreign exchange economist at Commonwealth Bank of Australia (CBA) in Sydney. “You also had a solid increase in commodity prices, and that’s also helping support both the Aussie and the kiwi.”
Australia’s dollar traded at $1.0422 as of 9:14 a.m. in Sydney from $1.0427 yesterday, when it rose as much as 0.8 percent to $1.0444, the highest since April 30. The Aussie is headed for 1.9 percent gain this week, the biggest since the five-day period ended June 8. New Zealand’s dollar was unchanged at 80.33 U.S. cents from yesterday, when it reached 80.55, the strongest since July 5. The so-called kiwi is set for a 0.9 percent weekly advance.

FOREX-Euro, Australian dollar lifted by equity gains
LONDON, July 19 (Reuters) - The euro gained against the dollar while the higher-yielding Australian dollar rose to a 2-1/2 month high, lifted by gains in equities which buoyed demand for riskier and higher-yielding currencies.
"The theme is one of carry plays because there is so much excess money out there that people are looking to get any sort of return on their investment, whether in bonds or in equities," said Ankita Dudani, currency strategist at RBS.

Treasuries Snap Decline on Outlook for Europe Debt Crisis(Source:Bloomberg)
Treasuries snapped a decline from yesterday on speculation Europe’s debt crisis and slowing U.S. economic growth will maintain investor appetite for the relative safety of America’s debt. Demand for Treasuries was supported before European data next week forecast to show consumer confidence remained weak and manufacturing shrank, adding to signs that the region’s debt crisis is hampering growth. U.S. debt has returned 2.5 percent in the three months ended yesterday, according to Bank of America Merrill Lynch data. The MSCI All-Country World Index (MXWD) of stocks handed investors a 2.1 percent loss including reinvested dividends, data compiled by Bloomberg show. “I’m keeping my bullish view on Treasuries,” said Masazumi Fukuoka, a senior dealer at Mitsubishi UFJ Trust & Banking Corp. in Singapore. “There’s ample money that has to find its way into U.S. debt as long as concerns over the European debt crisis and a slowdown in the U.S economy remain.”
Benchmark 10-year Treasury yields were little changed at 1.50 percent as of 10:20 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The price of the 1.75 percent security due in May 2022 was 102 1/4. The record low yield was 1.44 percent set June 1.

Investors Whipsawed by Hourly Price Swings in IBM, Coca-Cola(Source:Bloomberg)
Investors in three of the biggest Dow Jones Industrial Average (INDU) stocks were whipsawed by price swings that repeated every hour yesterday, fueling speculation the moves were a consequence of computerized trading. Shares of International Business Machines Corp. (IBM), McDonald’s Corp. (MCD) and Coca-Cola Co. (KO) swung between successive lows and highs in intervals that began near the top and bottom of each hour, data compiled by Bloomberg show. While only IBM finished more than 1 percent higher, the intraday patterns weren’t accompanied by any breaking news in the three companies where $3.42 billion worth of shares changed hands.
Regulators have increased scrutiny of computerized strategies that have risen to prominence in the U.S. after more than a decade of market structure reform. The Securities and Exchange Commission and Commodity Futures Trading Commission blamed a broker’s trading algorithm for setting into motion the events that caused the May 2010 market crash that briefly erased $862 billion from U.S. equities in less than 20 minutes. “Somebody probably has software that’s running an algorithm that’s either selling in 30-minute intervals or buying,” Bruce W. Weber, dean of the Alfred Lerner College of Business and Economics at the University of Delaware, said in a telephone interview. “For the market value of Coke to be going up and down in this way, oscillating every hour, is a pretty disconcerting observation. This is not going to raise investors’ confidence in the mechanics of our market.”

Home Sales to Factories Point to Second-Half Weakness: Economy(Source:Bloomberg)
Sales of existing U.S. homes unexpectedly dropped and manufacturing in the Philadelphia region contracted for a third month, showing economic weakness is extending into the second half of the year. Home purchases slid 5.4 percent in June to a 4.37 million annual rate, an eight-month low, figures from the National Association of Realtors showed today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index was minus 12.9 in July after minus 16.6 the month before. Readings of less than zero signal contraction. The figures underscore Fed Chairman Ben S. Bernanke’s concerns that growth may be too feeble to reduce unemployment stuck above 8 percent since February 2009. Other reports today showed consumer confidence weakened, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.
“We’ll have very slow growth,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York and the best forecaster of U.S. economic indicators in the two years through May, according to data compiled by Bloomberg News. “The excess supply of homes will weigh on housing for quite some time. Manufacturing is starting to suffer a bit. The labor market remains pretty soggy.”

Jobless Claims in U.S. Rise as Auto Layoff Effects Ease(Source:Bloomberg)
More Americans than forecast filed first-time claims for unemployment insurance payments last week, reflecting volatility induced by the annual auto-plant retooling period. Applications for jobless benefits increased by 34,000 to 386,000 in the week ended July 14, Labor Department figures showed today. Economists forecast 365,000 claims, according to the median estimate in a Bloomberg News survey. The volatility in the numbers was due to a change in the timing of annual automobile plant layoffs, a Labor Department official said as the data were released. Determining whether the labor market is improving or deteriorating has been more difficult in recent weeks because a reduction in the number of auto-plant layoffs typical at this point of the year has thrown the Labor Department’s seasonal adjustment process out of line. It may take weeks to judge the direction the labor market is taking.
“Seeing through the statistical noise, the labor market is pretty soggy, and the claims numbers will reflect that once they settle down,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York and the best forecaster of U.S. economic indicators in the two years through May, according to Bloomberg data. “I don’t think next week is going to be a clean read either, so you might have to wait a little while longer.” Stock futures climbed after the report. The contract on the Standard & Poor’s 500 Index maturing in September rose 0.3 percent to 1,372 at 8:39 a.m. in New York. The yield on the 10- year Treasury note rose to 1.51 percent from 1.5 percent late yesterday.

Americans Hold Dimmest View on Economic Outlook Since January(Source:Bloomberg)
The most Americans in six months said the economy in July was getting worse, indicating the slowdown in hiring is dimming moods as the third quarter begins. The share of households viewing the U.S. as heading in the wrong direction rose to 36 percent, the highest since January, from 33 percent in June. The Bloomberg monthly expectations gauge was minus 11, matching June as the lowest level since January. The weekly Bloomberg Consumer Comfort Index fell to minus 37.9 in the period ended July 15, the lowest in a month. Limited wage gains and unemployment stuck above 8 percent risk further slowing consumer spending and leaving the U.S. more vulnerable to a global slowdown. There is also growing pessimism little is being done in Washington to avoid the so-called fiscal cliff at the end of the year, when higher taxes and automatic spending cuts kick in, raising the risk of recession.
“A soft labor market and political tensions surrounding potential changes in tax policy are weighing on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Consumers are concerned about their incomes and have become much more cautious about spending. The economy is limping into the third quarter.”

Manufacturing in Philadelphia Area Falls for Third Month(Source:Bloomberg)
Manufacturing in the Philadelphia region shrank for the third consecutive month as new orders and employment declined. The Federal Reserve Bank of Philadelphia’s general economic index rose to minus 12.9 in July from minus 16.6 the month before. Economists forecast the gauge would improve to minus 8, according to the median estimate in a Bloomberg News survey. Readings of less than zero signal contraction in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware. The European debt crisis and slowing growth in China and Brazil are limiting demand for U.S. exports. In the U.S., elevated unemployment is restraining consumer spending, while a drought in the Midwest threatens sales of farm equipment made by companies such as Deere & Co. The report showed manufacturers’ outlook for future orders declined.
“You saw not only a continued contraction of activity, but a lessening of optimism,” said Steven Blitz, chief economist at ITG Investment Research Inc. in New York. “There’s nothing in their order books that’s getting them excited. For the economy, it means more of the same low-level growth.” Other data today showed that sales of existing homes unexpectedly dropped in June to an eight-month low, claims for unemployment benefits rose last week and an index of U.S. leading economic indicators fell more than forecast.

No Inflation With Record-Low Yields Boosting Emerging Bonds(Source:Bloomberg)
Bond yields in emerging markets are falling to record lows as inflation tumbles compared with benchmark interest rates, providing policy makers with more opportunities to lower borrowing costs. The GBI-EM Global Diversified Index on emerging-market bond yields declined 79 basis points, or 0.79 percentage point, this year to 5.79 percent, the lowest since JPMorgan Chase & Co. started to compile the data in 2003. Consumer price increases in 15 developing nations from Brazil to China slowed to an average 4 percent last month, even as central banks cut the mean policy rate to 5.5 percent. The 1.5 percentage-point gap was the widest since December 2009, according to data compiled by Bloomberg.
Slower inflation and weaker economic growth will prompt policy makers to reduce interest rates further, spurring gains in developing-nation bonds, according to GAM Investment and JPMorgan Chase & Co. That’s a turnaround from four years ago, when inflation exceeded benchmark borrowing costs and investors fled emerging markets as the global economy sank into a recession. “Rates are coming down and there are no signs of inflation, which is the classic bond bull market type of territory,” Paul McNamara, who oversees $6.5 billion in emerging-market debt as a money manager at GAM Investment, said in a telephone interview from London. “Emerging-market bonds still offer pretty good value.”

Buyers Bet Wen Can’t Keep Prices Down as Home Sales Gain(Source:Bloomberg)
Sales at Sunac West Chateau, a residential project in Beijing, surged almost 50 percent in June as the developer opened new buildings to attract buyers betting on a recovery even as the government pledges to keep a lid on the housing market. “In the first half of the year, it was like gazing at flowers in a fog,” said Lou Yanqing, deputy sales manager of the project, using a Chinese expression to describe the uncertainty over the government’s policies to curb house price gains. “We’re seeing some sunshine now, and going forward there’s a big chance that the clouds will clear,” she said. Premier Wen Jiabao said July 7 that citizens are worried prices will rise again, reiterating a pledge that his government will “unswervingly” continue property controls. Recent data suggest buyers aren’t listening: property sales and prices have rebounded as local governments relaxed some housing restrictions and the central bank cut interest rates.
“The possibility that history will repeat remains,” Credit Suisse Group AG analyst Vincent Chan said in a phone interview from Hong Kong, referring to past property surges that followed sales increases.

Hong Kong Jobless Rate May Rise on Europe Crisis, Graduates(Source:Bloomberg)
Hong Kong’s jobless rate may rise on weakness in the global economy and more graduates and school leavers seeking work, the government said, even as the latest data showed resilience in the labor market. “The Hong Kong economy can hardly stay unscathed,” the Financial Secretary’s Office said in an e-mailed response to questions from Bloomberg News, citing Europe’s debt crisis and the fragility of major advanced economies. The jobless rate for the three months through June was unchanged at a seasonally adjusted 3.2 percent, the government said on its website today. That was less than the 3.3 percent median forecast of six economists in a Bloomberg News survey and compares with a rate of as much as 5.5 percent during the global financial crisis. “As the economy is slowing this year, it is likely that the job market will follow suit,” said Joanne Yim, an economist at Hang Seng Bank Ltd. (11) in Hong Kong, forecasting an increase to a 4 percent jobless rate by year-end.
Hong Kong stocks rose on speculation China will take more action to boost growth and after U.S. housing starts jumped to the highest since 2008. The Hang Seng Index (HSI) advanced 1.7 percent.

Shipbuilders Lead Tripling in Korea Bond Sales This Week(Source:Bloomberg)
Sales of won-denominated bonds more than tripled this week as South Korean shipbuilders took advantage of record-low yields to raise funds amid slumping new orders and overseas deliveries. Hyundai Heavy Industries Co. (009540) and Daewoo Shipbuilding & Marine Engineering Co., which own two of the world’s three biggest shipyards, led issuance to 1.77 trillion won ($1.55 billion) from 560 billion won last week, according to data compiled by Bloomberg. Benchmark three-year corporate bond yields declined to 3.48 percent on July 18, the lowest since at least 1993, according to the Korea Financial Investment Association. “With a gloomy outlook for the shipbuilding industry, companies are dipping into the bond market to raise cash,” Lee Soo Jung, a credit analyst with SK Securities, said by telephone from Seoul on June 18. “At the same time, the market is conducive to borrowers with yields plummeting.”
Hyundai Heavy sold a record 700 billion won of securities as shipbuilders, which account for about 10 percent of total exports from Asia’s fourth-biggest economy, seek to boost capital through debt sales. South Korea’s central bank last week cut its outlook for 2012 growth, citing a protracted crisis in Europe for reducing the estimate to 3 percent from 3.5 percent. Borrowers are planning at least 720 billion won of sales next week, with Doosan Infracore Co., and Korea South-East Power Corp. poised to price notes, according to preliminary data compiled by Bloomberg.

Spain Struggles to Sell Debt as French Yields Fall to Record(Source:Bloomberg)
Spain’s five-year borrowing costs surged as the government pushed through spending cuts in the face of public protests, while France paid record-low yields of less than 1 percent to sell securities of the same maturity. Spanish five-year notes yielded an average 6.459 percent at auction today, up from 6.072 percent a month ago. French yields fell to 0.86 percent, almost half last month’s level. Prime Minister Mariano Rajoy, who didn’t turn up to defend his cuts in parliament, secured passage of the plan with 180 votes, indicating none of the opposition in the 350-seat chamber supported it. The premier, who asked other euro nations for as much as 100 billion euros ($123 billion) last month to bail out banks, is fighting to maintain access to capital markets. Lawmakers in Germany, where borrowing costs have turned negative as investors opt for the safest assets, are set to vote on the Spanish bailout agreement today.
“The danger to the financial sector in Spain can turn into danger for the financial stability of the euro area,” German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin today as they prepared to vote on aid to Spain.

U.K. Less-Than-Forecast Retail Sales Hit Recovery Hopes: Economy(Source:Bloomberg)
U.K. retail sales rose less than economists forecast last month, reducing expectations that Britain was able to exit a recession in the second quarter. Sales including auto fuel gained 0.1 percent from May, the Office for National Statistics said today in London. The median forecast of 18 economists in a Bloomberg News survey was for a 0.6 percent increase. Excluding fuel, sales were up 0.3 percent. Food sales dropped 0.7 percent. The U.K. had the most rain for a June since 1910 last month, curbing food sales, while an extra public holiday for the queen’s jubilee celebrations didn’t give a major boost to demand. The continued weakness in consumer spending is hindering Britain’s recovery after the economy shrank in the last quarter of 2011 and the first three months of this year.
It’s “another death knell for already low hopes that the economy avoided a third successive quarter of contraction,” said Howard Archer, an economist at IHS Global Insight in London. “Conditions remain tough for consumers with inflation still above earnings growth, the jobs outlook uncertain and tighter fiscal conditions affecting many people.”

South Africa Unexpectedly Cuts Benchmark Lending Rate(Source:Bloomberg)
South Africa’s central bank unexpectedly cut its benchmark interest rate by half a percentage point to help bolster the economy as inflation stayed within the bank’s target range. The repurchase rate was lowered to 5 percent, Governor Gill Marcus told reporters today in Pretoria, the capital. Only two of the 18 economists surveyed by Bloomberg predicted a reduction, with the rest expecting the rate will stay unchanged. The decision was unanimous after a “particularly robust” discussion, she said. Policy makers cut the repurchase rate for the first time since November 2010, joining central banks in India, Brazil, China and Europe in reducing borrowing costs this year to protect their economies from slower global growth. Marcus was provided the room to ease monetary policy after inflation eased to a 10-month low in June, slowing further from the top end of the 3 percent to 6 percent target range.
“They got so bearish so fast on the spill over of the euro zone economy,” Peter Attard Montalto, an economist at Nomura Plc in London, said in a telephone interview after the decision. “They have clearly been surprised by the downside of inflation and with the external growth worries, that has opened the door for cuts now.”

20120720 1018 Global Commodities Related News.

Midwest Weather Expected to Be Hot and Dry Through July(Source:Bloomberg)
The Midwest will probably remain dry through the end of the month and the heat that has been wilting crops may persist until September. Temperatures in the Great Plains and Midwest are expected to remain 5 to 7 degrees Fahrenheit above normal (2.8 to 3.9 Celsius) through the end of July, according to MDA EarthSat Weather in Gaithersburg, Maryland. The company’s 30- to 60-day outlook calls for above-normal temperatures to grip the center of the U.S. through September. “The pattern is driven by persistence, with the heat of the first two months of summer continuing into August,” MDA’s forecast showed. Hot, dry conditions in the Midwest have left corn and soybean fields in the worst shape since 1988 as the most severe U.S. drought since 1956 continues. Soybeans reached a record high $16.5125 a bushel today on the Chicago Board of Trade, surpassing the previous peak of $16.3675 on July 3, 2008.
Soybeans for November delivery rose 1.7 percent to $16.48 a bushel by 7 a.m. on the CBOT. The oilseed jumped 36 percent this year as U.S. harvest concerns followed a drought that slashed the past season’s production in Brazil and Argentina. Corn for December delivery rallied 1.3 percent to $7.945 a bushel after touching $7.98. The record for a most-active contract is $7.9925. Corn has surged 57 percent since mid-June. Futures for September delivery, the contract closest to expiration, rose as high as $8.115 today. The area from Nebraska and Iowa south to Texas and Louisiana is expected to have less than normal rainfall through July 28, according to Commodity Weather Group LLC in Bethesda, Maryland. The rainfall deficit may continue for Iowa, Illinois and Indiana through Aug. 2, according to Commodity Weather.

Crop Traders Extend Bullish Streak on U.S. Drought: Commodities(Source:Bloomberg)
Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show. The drought may persist in the Midwest for the rest of the growing season, the U.S. government said this week. Above- average temperatures and below-normal rainfall will continue through next week, according to meteorologist Telvent DTN.
The 55 percent jump in corn and 26 percent gain in soybeans since mid-June may spur another bout of global food-price inflation, after surges in 2008 and 2011 that sparked civil unrest in developing countries, Barclays Plc said in a report July 18. “There’s not much reason for us to see a slowdown in the price rally,” said Erin FitzPatrick, an analyst at Rabobank International in London, who predicted in April that soybeans would reach a record. “The size of the 2012-13 harvest is shrinking every day that we don’t get rain or a cooling off in the U.S. It’s fundamentally still bullish, even though we’re at these record prices.”

Crop Insurers Could Face First Loss Since 2002 on Drought(Source:Bloomberg)
Crop insurers may face their first underwriting loss since 2002 as the worst Midwest drought in more than two decades threatens the U.S. harvest, according to Iowa State University’s Bruce Babcock. “The only way they would make a profit is if they saw this disaster coming, because of the low water tables and the low soil-moisture levels at the beginning of the season, and they opted to minimize their exposure in the Corn Belt,” Babcock, an economics professor at the Ames, Iowa-based university, said today. “But the companies have made money year after year after year maximizing their exposure to risk in the Corn Belt because it’s been such a good run of years.”
Hot, dry weather across much of the Midwest has damaged crops, led to a rally in corn and soybean futures, and boosted insurance loss estimates. The U.S. subsidizes farmers’ premiums for so-called multiperil coverage, which protects against a loss of revenue or production as a result of drought, hail, wind, frost or other natural causes. Prices for the policies are set by an agency within the Department of Agriculture. Crop insurers including Ace Ltd. (ACE), QBE Insurance Group Ltd. (QBE) and Wells Fargo & Co. (WFC) will probably face higher costs this year as farmers make claims, Fitch Ratings said in a report yesterday. Private insurers sell and administer multiperil crop insurance in the U.S. In return, the federal government backstops the firms with payments and reinsurance.

Commodities Advance, Head for Longest Rally Since Late February(Source:Bloomberg)
Commodities headed for the longest rally since February as the worst U.S. drought in more than half a century threatened crops and on speculation that monetary easing by central banks will boost demand for raw materials. The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 1.6 percent to 649.93 at 11:10 a.m. in New York, after reaching 650.91, the highest since May 10. The gauge is up for the seventh session, the longest advance since Feb. 24. Soybeans jumped to a record, and wheat climbed to the highest in almost four years. Coffee, soybeans and cocoa led the rally. Global equities rallied on speculation that governments will act to spur economic growth. Federal Reserve Chairman Ben S. Bernanke said on July 17 that policy makers are studying options for further easing. The European Central Bank reduced interest rates to a record low on July 5, and the Bank of England announced the resumption of bond purchases on the same day.
“The Bank of England, European Central Bank and probably the Federal Reserve are all going to engage in additional accommodation,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “That is a plus for commodities. We have an across- the-board better tone to the commodity board here, and of course there’s the big fear surrounding the grain markets.” The GSCI index is up 0.8 percent this year. The MSCI All- Country World Index (MXWD) rose 5.2 percent, and Treasuries returned 2.7 percent, a Bank of America Corp. index showed. Grains helped lead the rally today as about 55 percent of the contiguous U.S. was in moderate to extreme drought at the end of June, the highest percentage since 1956, National Climatic Data Center figures show.

Wheat Jumps to Highest Since 2008 as Global Droughts Erode Crops(Source:Bloomberg)
Wheat futures jumped to the highest in almost four years as the worst drought since 1956 erodes crop prospects in the U.S. and dry weather hurts production in Australia and Russia. Little rain will fall during the next seven to 10 days in the northern Great Plains of the U.S., the world’s biggest wheat exporter, forecaster Telvent DTN said in a report. Australia will be drier-than-normal for the next three months, the Bureau of Meteorology said. Russian farmers will collect 46.5 million metric tons of the grain in the year that began July 1, down 4.1 percent from 2011, researcher SovEcon said. “Look at what’s going on in the U.S. and look at what’s going on in Australia and Russia, and people are looking at drawing down world carryout,” Mike O’Dea, a risk management consultant at INTL FCStone in Kansas City, Missouri, said by telephone today. “There are a lot of people talking up wheat right now.”
Wheat futures for September delivery rose 3.5 percent to settle at $9.35 a bushel at 2 p.m. on the Chicago Board of Trade, after reaching $9.38, the highest for a most-active contract since Aug. 21, 2008. Prices have surged 49 percent since mid-June. Farmers in Argentina will reduce wheat planting by 22 percent in the 2012-2013 crop year, the Rosario Cereals Exchange said yesterday. Australia is the second-biggest exporter, followed by Canada, Russia, Kazakhstan and Argentina, according to the U.S. Department of Agriculture. Wheat is the fourth-largest U.S. crop, valued at $14.4 billion in 2011, behind corn, soybeans and hay, government data show.

Pro Farmer: After the Bell Wheat Recap (Source:CME)
Wheat futures ended with gains in the teens to 30s in nearby contracts, while some deferred contracts faced pressure. Wheat enjoyed stronger gains than the front-month corn contract as wheat is being viewed as a value buy. Front-month corn futures rose to an all-time high on the weekly continuation chart today, but front-month Chicago wheat is around $4 lower than its all-time high set in 2008.

Wheat Market Recap Report (Source:CME)
September Wheat finished up 31 3/4 at 935, 3 off the high and 38 1/2 up from the low. December Wheat closed up 22 at 934 1/2. This was 27 up from the low and 8 1/4 off the high. September Chicago wheat soared to new highs today before backing off slightly midday on profit taking. September wheat closed 31 3/4 higher on the day. Wheat found support from sharply higher corn and soybean markets, along with concern over tightening world supplies in 2012/13. Jordan and Tunisia tendered to buy wheat today. Jordan bought 100,000 tonnes of option-origin wheat. The sale was reportedly made by the Black Sea. Tunisia bought 125,000 tonnes of soft milling wheat. Wheat also saw boost from better than expected export sales for the week ending July 12th. Net weekly export sales for wheat, came in at 589,200 tonnes. Sales of 532,000 metric tonnes are needed each week to reach the USDA forecast. Temperatures are expected to reach 95-105 degrees this week in the western Corn Belt, adding to corn stress. Wheat is also seeing support from speculation that Russian wheat production for 2012/13 will continue to fall. Outside markets are adding support with the US Dollar trading weaker and crude oil is sharply higher on the day. September Oats closed up 3 1/2 at 383 1/2. This was 3 1/4 up from the low and 6 off the high.

Pro Farmer: After the Bell Corn Recap (Source:CME)
Corn futures saw a very volatile day of trade and market bears gained the upper hand heading into the close. The July contract ended 12 3/4 cents higher and December settled 5 3/4 cents lower, but the rest of the market posted losses of 12 3/4 to 25 cents. September corn futures set a record high on the weekly continuation chart this morning thanks to ongoing concern about widespread drought and the extended forecast for more crop-damaging temps and dryness ahead.

Corn Market Recap for 7/19/2012(Source:CME)
September Corn finished up 10 1/2 at 805 1/2, 11 1/4 off the high and 15 1/4 up from the low. December Corn closed down 6 1/4 at 778. This was 1 1/2 up from the low and 21 off the high. September corn made new all-time highs today on concern that blistering temperatures this week and into next week will drop the new crop corn yield further. Bull spreading was active today as the December 2013 corn contract traded down 30 cents while the September 2012 contact saw double digit gains. Corn turned lower following the pit open after rumors circulated that China feeder companies planned on selling back cargos of US corn for a profit after sharp increases in prices. Argentina raised their corn crop production estimate to 21 million tonnes vs. previous estimates of 20.1 million tonnes. Additional pressure was added following an abysmal weekly export sales report. Weekly export sales for the week ending July 12th came in at 31,900 tonnes for the current marketing year and 148,800 for the 2012/13 marketing year, for a total of 180,700. This was well below the low end of market expectations. Old crop sales of 205,000 tonnes are needed each week to reach the USDA forecast. Current price levels suggest the USDA may need to revise the 2011/12 export forecast lower. Weather forecasts for most of the Midwest look terrible for the US corn crop the next two weeks. Average rainfall was seen in the eastern Corn Belt in the last 48 hours, however the focus of the market has shifted to the western Corn Belt where the 10 day forecast calls for 95-105 degree temperatures. The market is anticipating another drop in corn condition ratings next Monday which will likely shift yield estimates lower. Technical traders saw the 799 high for December corn and lower close on the day as a potential reversal top signal and this could attract technical selling. September Rice finished down 0.04 at 15.495, 0.195 off the high and equal to the low.

GRAINS-Soybeans, corn climb to record highs on U.S. drought
SYDNEY, July 19 (Reuters) - U.S. soybeans rose to a record high while front-month corn scaled an all-time high as weather maps showed no sign of an end to a drought that has damaged U.S. crops and provoked concern about food supplies.
"Soybeans are entering their pollination stage now later than corn, and so the weather will be a bigger factor for soybeans at the moment," said Lynette Tan, investment analyst at Phillip Futures.

Argentina 2012-13 wheat area seen down 22 pct
BUENOS AIRES, July 18 (Reuters) - Argentina's 2012-13 wheat area is expected to shrink 22 percent from last season, the country's biggest grains exchange said on Wednesday in its first plantings forecast.
Farmers in Argentina, the world's sixth-biggest wheat exporter and the main supplier to neighboring Brazil, are seen dedicating 3.59 million hectares to the grain, according to Rosario Grains Exchange.

India's monsoon falls short but no drought yet
NEW DELHI, July 18 (Reuters) - Halfway through the crucial planting month of July, India's monsoon rains continue to cause concern, with sowing of pulses and rice behind schedule and rainfall still 22 percent below average for the time of year.
If there is no pick-up by the end of July, when India's meteorological department will update its official forecast, this year might qualify as a drought, with rainfall less than 90 percent of average annual levels.

Russian grain exports seen halving in 2012/13
MOSCOW, July 18 (Reuters) - (Opinions in this report represent the views of SovEcon Ltd, an independent research organisation specialising in agricultural production and trade in the former Soviet Union. They should not be seen as reflecting the views of Reuters.)
Russian grain exports amounted to 28.1 million tonnes in the 2011/12 crop year, including rice, flour equivalent and legumes. In the coming season exports could decline by half to 13-14 million tonnes due to a very tight forecast supply/demand balance.

Heat wave and drought besiege already deteriorated US crops
CHICAGO, July 18 (Reuters) - It keeps getting worse for the U.S. Midwest, whose corn and soybean crops are deteriorating fast from the harshest drought in more than half a century.
The weather will remain hot and dry for the next week in the western Midwest, though cooler temperatures and light rain in its east may provide some relief from relentless drought, an agricultural meteorologist said Wednesday.

Weakest Monsoon Since 2009 to Shrink India Rice Harvest(Source:Bloomberg)
The rice harvest in India, the world’s second-biggest producer, is set to drop from an all-time high as the weakest monsoon in three years slows planting, potentially boosting global prices. “It will be difficult to match last year’s record rice production,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Manila. Output was 104.3 million tons in the year ended June 30. A 22 percent shortfall in monsoon rains delayed sowing of crops from rice to cotton, stoking a rally in commodity prices and threatening to accelerate India’s inflation that exceeded 7 percent for a fifth straight month in June. Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Costly rice, staple for half the world, may increase global food prices forecast by the United Nations to advance this month.
“The whole grains complex of wheat, corns, soybeans are forcing rice prices higher as well,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney. “Indian production is very important for the market.” Rice planting in India dropped 19 percent to 9.68 million hectares (24 million acres) this year from 12.04 million hectares a year earlier, the farm ministry said July 13. The country is estimated to export 8 million tons of rice in 2011-2012, according to the U.S. Department of Agriculture, accounting for about 25 percent of the global trade.

SOFTS-Sugar, coffee edge up early in cautious trade
LONDON, July 19 (Reuters) - Sugar, coffee and cocoa futures on ICE were firmer in thin early trade buoyed by stronger financial markets and a weaker dollar. Dealers said the sugar market was underpinned by the prospect that weak monsoon rains may reduce production in top consumer India. Rains in Australia have also slowed the flow of supplies from the world's third-largest raw sugar exporter.

Honduras sees coffee exports growing 29 pct in 2011/12
TEGUCIGALPA, July 18 (Reuters) - Coffee exports from Honduras, Central America's top producer, are expected to reach nearly 5 million 60-kg bags for the current 2011/2012 harvesting season, up 29 percent over the previous cycle.
The head of Honduras' national coffee institute IHCAFE said on Wednesday that the surge in exports was due to increased productivity motivated by high market prices.

Brazil's Copersucar may again turn buyer of sugar-CEO
SAO PAULO, July 18 (Reuters) - Copersucar S.A., the world's biggest sugar exporter, may again turn to buying the physical commodity -- after surprising the market with purchases earlier this month -- as rains continue to impede the harvest in Brazil, its chief executive said on Wednesday.
Copersucar Chief Executive Paulo Roberto de Souza said rain over the past few days has forced 42 percent of the group's 48 associate mills to stop crushing.

Bahia's cocoa flow picks up but buyers still absent
SAO PAULO, July 18 (Reuters) - Deliveries of cocoa from Brazil's top producing state Bahia picked up again this week but the partial absence of terminal buyers is keeping cocoa upstate and in middlemen's warehouses, a local analyst said.
The flow of cocoa from other producing states such as Para is back to normal, data from Bahia Commercial Association and comments from analyst Thomas Hartmann showed.

Brazil rain stops crush in many sugar mills - Copersucar
SAO PAULO, July 18 (Reuters) - One of Brazil's largest sugar milling groups, Copersucar, said rain over the past few days has forced 42 percent of the group's associate mills to stop crushing on Wednesday.
The situation underscores how Brazil's cane belt has seen unseasonable rainfall in the past few months that has reduced mills' harvesting and cut into production in the world's leading producer of sugar.

Indonesia's Sulawesi June cocoa bean exports fall 68 pct y/y
JAKARTA, July 18 (Reuters) - Indonesia's cocoa bean exports from its main growing island of Sulawesi fell 68 percent to 4,935.48 tonnes in June from 15,232.68 tonnes a year earlier, industry data showed on Wednesday.
Sulawesi cocoa exports were at 7,114.46 tonnes in May.  

China eyes global oil futures prize
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, July 19 (Reuters) - Breaking the global dominance of West Texas Intermediate and Brent in the crude futures market is no easy task, but the Chinese are now lining up for a shot.
The Shanghai Futures Exchange (SHFE) is planning to start up an oil futures market within months and has made reassuring noises that foreigners will be allowed to participate fully.

OIL-Oil rises above $106 on Middle East tension
LONDON, July 19 (Reuters) - Oil rose above $106 a barrel to hit a seven-week high as a rise in tension in the Middle East brought supply concerns back into focus.
"U.S. crude rising above $90 implies that overall sentiment is turning positive," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments. "They touched their lows in June and are turning around. Tension between Iran and the West are also substantial factors."

Oil Drops From Nine-Week High on Weaker-Demand Outlook(Source:Bloomberg)
Oil fell from a nine-week high in New York, paring a second weekly advance, on speculation gains may have been excessive amid worse-than-expected economic data and signs seasonal crude demand is weakening. Futures slipped as much as 0.8 percent, snapping the longest run of gains since February. Oil may fall next week on signs of slowing economic growth, according to a Bloomberg News survey. Sales of existing U.S. homes unexpectedly dropped in June and manufacturing in the Philadelphia region contracted for a third month in July, reports showed yesterday. OPEC will cut shipments this month as the seasonal demand for driving fuel fades, according to Oil Movements, a tanker tracker. “The negatives are the economy,” Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney, said in a telephone interview. “We’ve had seven days of gains, the market is long, the window closes very quickly with this sentiment.”
Crude for August delivery, which expires today, slid as much as 72 cents to $91.94 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.13 at 11:20 a.m. Sydney time. It climbed 3.1 percent yesterday to $92.66, the highest close since May 16. The more-active September future decreased 53 cents to $92.44. Front-month prices are 5.8 percent higher this week and down 6.8 percent this year. Brent crude for September settlement was at $107.45 a barrel, down 35 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium to West Texas Intermediate of $15.01, from $14.83 yesterday.

Biggest Iron Miner Vale Lifts Output as Brazil Rain Eases(Source:Bloomberg)
Vale SA (VALE5)’s second-quarter iron-ore production rose 0.4 percent, beating analysts’ estimates, as the world’s biggest producer of the steel-making ingredient lost less time to rain at its largest mine. Output climbed to 80.5 million metric tons from 80.3 million tons a year ago, the Rio de Janeiro-based company said in a regulatory filing yesterday. That beat the 80.2-million ton average estimate of six analysts surveyed by Bloomberg. BHP Billiton Ltd. (BHP)’s quarterly iron-ore output climbed 15 percent. Brazilian iron-ore exports rose 2.1 percent in the quarter as expanding Asian demand partially offset a slump in European orders. Steel demand in China, the biggest consumer of iron ore, is performing in a “very good” way this year, Vale Chief Executive Officer Murilo Ferreira said last month. Production at Carajas, the world’s largest iron-ore mine, grew 5.2 percent in the second quarter as weather conditions improved, Vale said.
“We were positively impressed by the recovery in production at Carajas, which delivers Vale’s highest quality ore at the lowest cost,” Barclays Plc analysts led by Leonardo Correa in Sao Paulo said in a note to customers yesterday. Vale, the world’s second-largest mining company, slid 0.1 percent to 38.57 reais at the close in Sao Paulo, the lowest since Jun 28.